To give Americans purchasing power, Biden is ready to raise tariffs on Chinese products

Announcing Monday in Tokyo that it could raise customs duties on Chinese imports, which “They were imposed by the last administration”, Joe Biden is not so much looking to get away from his predecessor Donald Trump, who had engaged in a trade war with the Asian giant, to give priority to the purchasing power of the American family. The constant growth of inflation, 8.3% in April, which reached the highest level for 40 years in the United States, shook the priorities of the American president.

25% tax.

Indeed, by reducing taxes on imported products, they automatically become cheaper for the American consumer. When he came to the White House in January 2021, Joe Biden maintained these tariffs. They add up to 25% in a whole range of Chinese goods and industrial components worth 250 billion dollars. At the time Katherine Tai, the Secretary of Commerce, justified this decision in the remedy an unbalanced and unfair trade situation”, adding that a sudden removal of these taxes could damage the US economy (see chart). Obviously, this is no longer the case. The situation of the increasingly disgruntled consumer has become more worrying than that of the American exporting producer.

Chinese exports to the United States by value (in billions of dollars)

In this new context, Beijing’s “dumping” is also favorable to the purchasing power of the American consumer. By subsidizing its exports to the United States, the Chinese government operates a transfer of money from the pocket of the Chinese taxpayer to that of the American consumer by reducing the price of the final product exported from China to the United States.

China is actually the country that subsidizes its industry and trade the most in the world. In 2019, it allocated 248 billion dollars of public money, equivalent to 1.73% of GDP, to this support in the form of subsidized loans or even subsidies, according to the estimate established in a report published by the Center for Strategic Studies and International. (CSIS), a Washington-based think tank, acquired by the Wall Street Journal. This support is the highest both in quantity and in part of the GDP, the CSIS underlines, compared to the seven other economies screened (South Korea, France, Germany, Japan, Taiwan, the United States and Brazil). The second country behind China is South Korea with 0.67% of its GDP. For its part, the United States will dedicate the equivalent of 0.39% of its GDP.

“Harm to workers and businesses”

Joe Biden’s decision is not a 160 degree change. In October 2021, as the economic slowdown became a reality after the end of the confinement, and inflation seemed less and less “transitory”, Joe Biden was as critical of Beijing as his predecessor. “When President Biden took office, he made it clear that Phase 1 of the agreement (signed by Donald Trump in January 2020) did not address our main problems with China, which are structural and characterized by a state approach to the economy and trade that distorts competition by supporting state-owned enterprises, limiting market access and other coercive practices and predators of trade and technology. The harm done to American workers and businesses by these practices is well documented.”explained a senior official, during a briefing from the White House.

Especially since China’s “dumping” will increase as its economy sees difficulties piling up. The People’s Bank of China announced another rate cut last week, after those in December and January. Inflation is not currently a cause for concern. posted 2.1% in April over a year. On the other hand, some indicators turn red. The unemployment rate reached 6.1%, practically returning to its 2020 level at the beginning of the pandemic, when it had reached an all-time high. Exports grew in April by only 3.9% in a year, a sharp drop compared to 14.7% in March. For its part, retail sales fell by 3.5% year-on-year, for the first time since July 2020.

Rising recession risk

“The risk of recession is rising, raising challenges for Beijing to meet its growth target of 5.5% in 2022”, say experts from the Japanese bank Nomura, which currently predicts GDP growth of 3.9% for this year. In the first quarter of 2022, growth was 4.8% over a year, but the consequences of the confinement to curb the spread of Covid-19, especially in Shanghai, and the slowdown of global activity caused by the war in Ukraine will have an impact in 2022. the coming months. Under these conditions, a rise in US tariffs on its exports would still be good for Beijing.